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2016 (9) TMI 753 - ITAT AHMEDABAD

2016 (9) TMI 753 - ITAT AHMEDABAD - TMI - Addition u/s.145A - inclusion of unutilized CENVAT credit and other taxes to the closing stock. - assessee submitted that it follows exclusive method of accounting and does not debit the CENVAT and other taxes to the Profit & Loss Account (P&L A/c.) - Held that:- It is an undisputed fact that assessee is following exclusive method of accounting whereby it does not debits the taxes paid to the purchases, consumption of stock and the aforesaid method of ac .....

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sessee has failed to prove the nature of services rendered by the respective parties to the assessee - Held that:- Even before us, assessee has not placed any material on record by which it could be demonstrated the nature of services rendered by those parties to the assessee. However, as far as payment of sales commission to Devkalpi Dyes & Intermediates is concerned, we find from the chart of commission that has been placed by assessee in the paper-book that assessee had paid ₹ 47,775/- .....

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the total disallowance of ₹ 7,15,111/-, we direct the deletion of ₹ 47,302/- being the amount of commission paid to Devkalpi Dyes & Intermediates and uphold the balance addition(s) of commission made to other parties. - Decided partly in favour of assessee - I.T.A. No.278/Ahd/2011 - Dated:- 9-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Shri S.N. Divatia, AR For The Respondent : Shri Sanjay Kumar, Sr.DR ORDER PER SHRI ANI .....

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77; 1,35,05,470/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 21/12/2009 and the total income was determined at ₹ 1,62,24,190/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 30/11/2010 (in Appeal No. CIT(A)-XVI/JCT, Range-3/407/09-10) dismissed the appeal of the assessee. Aggriev .....

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evidence produced and submission made. The ld.CIT(A) ought to have admitted the additional evidence produced by the appellant 2.1. The Ld.CIT(A) has grievously erred in law and or on facts in upholding that the entire unutilized balances of various taxes aggregating to ₹ 20,03,604 was required to be included in the valuation of cl.stock u/s.145A(b) of the Act. 2.2 That in the facts and circumstances of the case and in law, the Ld.CIT(A) ought not to have upheld the valuation of cl.stock by .....

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pholding the disallowances of sales commission of ₹ 7,15,111 as non-genuine and unsupported by the proof of services. 4.2. The observations made and the conclusion reached by CIT(A) in upholding the disallowance of commission of ₹ 7,15,111. 4.3. The Ld.CIT(A) has erred in not admitting the additional evidences with regard to the commission expenses. 3. At the outset, ld.AR submitted that though assessee has raised various grounds but the issues to be decided are only two issues, name .....

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order). He also noticed that assessee had not considered the aforesaid balances of tax while valuing the closing stock. AO was of the view that as per provisions of section 145A of the Act, the taxes/duties/cess/fees related to stock had to be added to the closing stock. The assessee was asked to show-cause as to why adjustment was made u/s.145A of the Act be not made to which assessee inter-alia submitted that it follows exclusive method of accounting and does not debit the CENVAT and other tax .....

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stock and accordingly made the addition. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A) who upheld the order of the AO by observing as under:- 2.3.3. From the above, it is clear that even if the assessee follows exclusive method of accounting, still it has to give effect to the adjustments as per section 145A. As stated above, the appellant is required to add the taxes, duties, etc. to both opening and closing stock as well as in the purchases and sales. However, .....

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assessee can follow the exclusive method for the book purposes but for the purpose of tax audit report and disallowance u/s.43B it is necessary that the assessee must show the effect of Section 145A by following the inclusive method i.e. by including all tax, duties, cess etc. in the closing stock. These taxes, duties, etc. will have to be added to the closing stock of the current year in view of the above discussion. However, the assessee has to necessarily follow the closing stock of last yea .....

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ate Bench of the Tribunal (ITAT A Bench Ahmedabad) on identical facts, in the case of ACIT vs. Shri Paragbhai Ramanlal Patel in ITA No.832/Ahd/2011 for AY 2007-08 order dated 23/01/2015 had decided the issue in favour of assessee. He placed on record the copy of the aforesaid order and pointed to the relevant findings of the order of the Tribunal. He therefore, submitted that following the aforesaid decision of the Coordinate Bench, the addition made by the AO be deleted. Ld.Sr.DR on the other h .....

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accounting of taxes has been consistently followed by the assessee in earlier and succeeding years and is also stated to have been accepted by Revenue. We find that the Hon ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co.Ltd. reported at (2003) 261 ITR 275 (SC) has observed that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. We further find that on identical facts, the Coordinate Bench of Tribunal in the .....

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allowed u/s.43B of the Act on payment basis. Before us, Revenue has not brought any material on record to controvert the findings of Ld.CIT(A) nor has brought any contrary binding decision in its support. We therefore find no reason to interfere with the order of Ld.CIT(A). Thus this ground of Revenue is dismissed. 5.1. Further, before us, Revenue has not brought any contrary binding decision in its support. In view of the aforesaid facts and following the decisions cited hereinabove, we are of .....

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Rubber Products Rs.48,000/- (g) Shri Vishal Jitendrakumar Patel Rs.1,27,400/- (h) Shri Navinbhai R.Patel Rs.3,72,000/- (i) Smt.Bina N.Shah Rs.9,784/- Total Rs.7,15,111/- 7. The assessee was asked to justify the claim of expenditure and also furnish the details of services rendered by them. AO noted that assessee had failed to submit any evidence to prove the genuineness of payment of sales commission, need for payment and proof of services rendered by such persons to the assessee. The submissio .....

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1/- as non-genuine, in the assessment order, the AO has stated that the assessee has claimed payment of commission to 9 parties, totaling to ₹ 715111/-. The commission is stated to have been paid as sales commission. The AO asked the assessee to justify the payment of commission by giving evidence of services rendered as well as confirmations from the parties who had received the commission. The assessee submitted ledger copy of the sales commission, a ledger copy of IDS and commission. Th .....

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genuineness of payment of commission. The assessee has failed to give nature and proof of services rendered by such persons. The assessee has given only details of payment and TDS deducted which by itself does not prove the commission payment. The AO thereafter relied on several decisions of Supreme Court and other high courts to say that payment and deduction of TDS and even existence of an agreement by itself do not justify the payment of commission unless the assessee to services rendered. T .....

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mission and the relevant evidence were produced, The appellant had requested the parties to attend before the AO, but they did not do so on the ground that the correspondence and other material were trade secret and cannot be shown to the AO. Shri Navin Patel clearly stated so. The appellant stated, that the AO should be directed to summon these parties to verify the payments. The appellant further stated that the cases relied upon by the AO are distinguishable on facts. 3.3.1 1 have considered .....

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the assessee and these parties, with respect to the services being rendered has been given. Neither in the form of letters nor in the form of e-mails the assessee has submitted any proof regarding services being rendered for effecting the sales. The presence of agreements., payments and even deduction of TDS by itself does not prove the services rendered and hence do not justify the allowability of commission. The assessee has failed to prove the genuineness of the payment of the sales commissio .....

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dered neither during the assessment proceedings not during the appellate proceedings. The Hon. Supreme Court In the case of Laxmirattan Cotton Mills [73 ITR 634], has stated that the burden of proving that services were rendered by the managing agents for earning the remuneration lay upon the company and If no reliable evidence was forthcoming the Tribunal was competent to reach the conclusion that ii did. The recitals in the managing agency agreement which authorised the managing agents to do c .....

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Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid, to the selling agents or any part thereof is properly deductible under section 37 of the Act. Swadeshi Cotton Mills Co. Ltd. v. Commissioner of Income-tax [1967] 63 I.T.R. 57 (S.C.) followed. In view of the above, since the appellant has failed to prove the .....

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2/-) was also made in subsequent assessment years and it has been allowed in the scrutiny assessment. He therefore submitted that since the payment of commission has been accepted by the Revenue in subsequent years and the payment has not been doubted, it needs to be allowed. With respect to the payments of commission to other parties, he submitted that before making the payment assessee had deducted TDS. He therefore submitted that the payment of commission be allowed. 8.2. Ld.DR, on the other .....

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